The True-Up Bill That Lands After a Claremont Closing

A buyer closes on a Claremont solar home in the spring, moves in, receives modest electric bills all summer, and then a much larger statement arrives covering a period that began before they owned the house.

This is the true-up, and it is one of the few solar surprises that lands entirely AFTER a transaction is over, which is exactly why it is worth understanding before one starts.

Anthony is a real estate licensee, not a utility, a lender, an attorney or a tax adviser. Utility billing structures, tariffs and settlement practices vary and change constantly. Nothing here describes any particular account. Confirm how a specific property is billed with the utility itself before relying on any of it.

Why solar billing runs on a cycle

A grid-connected solar home does not consume and produce in step. It generates heavily in some months and draws heavily in others, and the arrangement between the customer and the utility accounts for that over a longer period rather than month by month.

The result, in general terms, is that interim statements can be small while the account carries a running position, and that the position is settled on a periodic basis. That settlement is commonly called a true-up.

The details of how it works, what is counted, and how a balance is settled depend on the tariff the property is on and on the utility serving it. Those arrangements change; the utility is the only authority on a specific account. The point here is structural, and the structure is what creates the transaction issue.

The cycle does not know about your escrow

The settlement period was set when the system was connected. It has a start date and an anniversary, and neither of them moves because a house sold.

So a sale that closes partway through a cycle divides the period between two households. The seller lived there for part of it. The buyer lived there for the rest. And the statement, when it arrives, goes to whoever holds the account at that moment, which is the buyer.

The buyer then receives a bill covering a stretch of time that includes months in which they did not own the property. Nothing has gone wrong. The billing cycle simply is not aligned with the closing date, and nobody arranged for it to be.

Where in a transaction this belongs

It belongs in two places, and it usually appears in neither.

First, in the questions a buyer asks about the system. The habit of asking the account's own records rather than relying on impressions is the method set out in the first questions guide. Knowing when the settlement period ends is part of knowing what you are buying.

Second, in the closing paperwork if the parties want it handled. Items that span a closing date are ordinarily dealt with by agreement between the parties and reflected in escrow. A solar settlement period is capable of being addressed that way, and it is addressed only when somebody raises it. Where solar items get written into a transaction is the subject of the escrow instructions guide.

Whether it should be addressed is a judgment call for the parties, taken with the escrow holder and, where the sums matter, with the appropriate professional. Raising it and deciding not to is a decision. Not raising it is an accident.

What a buyer should establish

• When the current settlement period started, and when it ends.
• What the account's position has looked like historically, which is a question for the utility and the seller's own statements.
• Whether the property's arrangement changes on a transfer of ownership, and what the utility requires when the account changes hands.
• Whether the system has been producing normally through the period, which the production history shows and which is why the production report guide matters here.
• What the household's own consumption is likely to be, which is genuinely different from the seller's and is the variable nobody can hand over.

That last point is worth dwelling on. A settlement position reflects both production and consumption. A buyer inheriting a system that comfortably covered a two-person household may run a very different balance with a larger family, more air conditioning, or a vehicle charging in the garage. The array does not change. The arithmetic does.

What a seller should do

Say when the cycle ends and hand over the recent statements. It is a small courtesy that prevents a specific and predictable complaint after closing, and it costs a seller nothing to be the person who mentioned it first.

Where a seller has any reason to expect a substantial settlement amount, that expectation is a fact about the property's operation, and buyers are entitled to a straight answer when they ask.

Do not confuse two different bills

A settlement on the electricity account is one thing. A payment under a lease, a power purchase agreement or a solar loan is another, and it continues on its own schedule regardless of the utility cycle. A solar home can carry both. Which arrangement generates which obligation follows from the ownership split described in the owned versus leased guide.

Where to go next

Ask the utility when the cycle ends, ask the seller for recent statements, and decide with your escrow holder whether the period should be addressed at closing. The wider set of solar transaction questions is collected in the solar homes guide.

Anthony Grynchal has been licensed in California since November 2009.